ECB Reportedly Considering Slashing QE In Half In January, EURUSD Shrugs

Mario Draghi's 'leaks' have lost their mojo.

ECB officials are considering cutting their monthly bond buying by at least half starting in January and keeping their program active for at least nine months, according to Bloomberg which cites 'officials familiar with the debate'.

Reducing quantitative easing to 30 billion euros ($36 billion) a month from the current pace of 60 billion euros is a feasible option, said the officials, who asked not to be identified because the deliberations are private. While the central bank’s governors are split on the need to identify an end date for purchases, a pledge to keep buying bonds until September -- with the proviso that it could be extended if needed -- may offer grounds for compromise, they said.


Policy makers led by President Mario Draghi are becoming increasingly confident that ECB policy makers will on Oct. 26 agree to the specifics of how much debt the euro-area’s central banks will buy in the coming year. After more than 2 1/2 years of trying to revive the region’s economy through bond purchases, some governors see the recent period of robust growth as a reason to rein in the support. Others are concerned that inflation remains too weak.

Separately, the ECB's trial balloon sources must have been working in overdrive because the central bank's favorite media outlet, the FX trading desk also known as Reuters, just blasted a similar report according to which "ECB policymakers are in broad agreement to prolong asset purchases at a lower volume at their October meeting with views converging on a nine months extension."

The details:

  • ECB has consensus to extend asset purchases at lower volumes on Oct 26
  • Agreed on reducing buys from €60 bln/month for nine months
  • Debating buys between €25-40 bln, whether programme should be open-ended
  • Reuters sources say no formal proposals made yet
  • €25BN would be on the lower side of expectations
  • Draghi defended pledge to keep rates low well past QE Thurs

EURUSD dipped a whole 15 pips on the headlines... then rallied it all back.

Typically this kind of leak is a strawman aimed at testing the market's response in an effort to gauge just how ready traders are to accept the punchbowl being removed.

In this case the now-blinkered traders in FX land seem to have either lost all confidence in these leaks, or all belief that Draghi can ever pull out without immediately piling back in at the first sign of weakness.